Treasury Inspector General for Tax Administration

Press Release

TIGTA: IRS Is Increasing Its Oversight Of Taxpayers With Foreign Financial Assets

WASHINGTON - The Internal Revenue Service (IRS) is increasing its oversight of taxpayers with foreign financial assets, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The number of individuals filing a Report of Foreign Bank and Financial Accounts (FBAR) with the Department of the Treasury has increased annually from 2004 to 2009, TIGTA found. Individuals doing business in the United States who have foreign financial accounts with an aggregate value of more than $10,000 are required to file a FBAR.

TIGTA also found that the number of FBAR-related examinations increased 96 percent (from 334 to 656) from Fiscal Year (FY) 2004 to FY 2009. In addition, the number of FBAR penalty assessments grew from $4.2 million to $20.5 million, an increase of 388 percent over the same period, while FBAR penalty collections grew from $1.8 million to $9.8 million, an increase of 444 percent. The IRS, in collaboration with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), has also revised the FBAR form and instructions and conducted education and outreach efforts on the filing of FBARs.

However, neither the IRS nor the FinCEN has an established method to estimate the potential population of required filers because the FBAR filing program is a self-reporting program. Persons filing abroad often open their financial accounts in jurisdictions with bank secrecy laws.

Under the Hiring Incentives to Restore Employment Act, which the President signed in March 2010, individual taxpayers with an aggregate balance of more than $50,000 in foreign financial assets must file new foreign financial-disclosure statements with their income tax returns. This new reporting requirement allows the IRS to verify the information or lack of information filed. The IRS is also developing procedures and guidance to implement this new reporting requirement.

“As a growing number of taxpayers now conduct foreign financial transactions, it is good news that the IRS is increasing its oversight of this area,” said J. Russell George, the Treasury Inspector General for Tax Administration. With the recently added disclosure requirements, the IRS must ensure the effective implementation of this provision,” added George.

TIGTA did not make any recommendations in this report, and the IRS did not provide any comments on the draft report.